According to Section 1031 of the United States, Internal Revenue Code taxpayers are permitted to defer recognition of capital gains (assets that are sold after their value has increased throughout their holding period – e.g. car, business, stock shares ) and any related federal income liability. This is done in exchange for investment properties when you reinvest the sale’s proceeds within a certain time frame in another similar property that is of at least equal value. The process itself is known as a 1031 Exchange.

This process gets its name from Section 1031 of the U.S. Internal Revenue Code. According to this code, you must then hold onto an acquired property for at least 5 years, or else the sale will be fully taxable. Unfortunately, during this period of time, you won’t be permitted to live in this property yourself.